Question

# 1.      What are the total expenses and losses (see Consolidated Statement of Activities) as a percentage of...

1.      What are the total expenses and losses (see Consolidated Statement of Activities) as a percentage of total net assets (see Consolidated Statements of Financial Position)? Do you think this is a healthy percentage? What about the unrestricted and restricted net assets?

Total expenses and losses are \$226,597,766 and total net assets are \$359,846,541.

Unrestricted net assets are \$165,323,688 and restricted (temporarily and permanent) net assets are \$194,522,853.

Ans: Calculation of % of Total Expenses & Losses to Total Net Assets is as follows:-

= Total Expenses & losses * 100
Total Net assets

= \$ 226597766 * 100 = 62.970%
\$ 359846541

Inference:- This formula measures how efficiently a assets in NPO is managed. We can think of it like an expense to asset comparison. A higher ratio indicates that more expenses are incurred to manage the NPO with a certain amount of assets. A lower ratio indicates that less are expenses are needed to measure the same amount of assets. In other words, NPO is doing a more efficient job at operating the fund.
This ratio can be reduced in two ways:-
(a) increase revenues or (b) decrease expenses. Although a lower percentage is always better than a higher one, there is no standard percentage.

Now discussing, about the unrestricted and restricted net assets

1. Unrestricted net assets :- When the donor doesn’t specify about where & how the non profit organisation is to use the given donation, it is called as Unrestricted net assets. These type of donations are shown in the statement of activities (the income statement of NPO) as unrestricted contribution revenue and will appear in its Balance Sheet on the Assets side. These donations can be used for any purpose by the NPO as and when required.
2. Restricted net assets- When the donor specify about where & how the non profit organisation is to use the given donation, it is called as Unrestricted net assets. These donations are made for a particular task, project or construction.

There are 2 sub types of Restricted net assets

1. Temporarily restricted net assets – This type of donation is recorded as temporarily restricted contribution revenues on the statement of activities (the income statement of NPO) and will appear as an asset on the statement of financial position (the Balance Sheet of NPO). To balance, temporarily restricted net assets will also increase.
These donations are temporarily restricted because they have a specific purpose for which they must be used within an expected amount of time.

(ii) Permanently restricted net assets :- In other cases, a donor may make a donation in perpetuity.In cases like these, the non-profit would recognize the donation as permanently restricted contribution revenues on the statement of activities and it would increase permanently restricted net assets on the balance sheet.

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